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The bloc’s largest economies will shoulder the burden of a £30 billion loss in trade with the UK in a no deal scenario, according to a new report. German insurance giants Allianz have revealed potential slumps in business for car-makers, chemical producers and other manufacturers across the bloc if Michel Barnier refuses to budge in the wrangling over a post-Brexit trade deal. Its report urges EU leaders, such as Germany’s Angela Merkel and France’s Emmanuel Macron, to agree to a compromise to prevent a loss of £30 billion in the bloc’s exports to the UK because of the introduction of trade tariffs.
“A hard Brexit could cost as much as €33 billion in annual exports to the EU,” it says.
Researchers predict Germany could lose as much as £7.4 billion in annual trade with the UK as a result of a no deal Brexit.
And France would be set for a £3.3 billion loss unless an agreement can be found in the next three weeks.
Boris Johnson has been adamant Britain will trade with the EU on “Australia-style” terms if the bloc refuses to offer concessions on its demands for continued access to Britain’s fishing waters and a regulatory level-playing field, including on state subsidies for businesses.
The Prime Minister’s plan would see the introduction of trade tariffs between the UK and EU unless compromises are found.
Until now, President Macron has been the EU’s most uncompromising leader, insisting the bloc maintains its hardline stance in the row over fisheries and state aid.
According to the study, this would impact a number of crucial industries in both Germany and France.
And Johan Geeroms, risk director for Euler Hermes, a Dutch subsidiary of Allianz, said the risk of a “hard Brexit has risen to almost 50 percent”.
“If we get a no deal Brexit, the entire export business to the UK will be overhauled,” he added.
“New agreements are needed for this. Road, air, sea transport. Also consider enormous disruption within supply chains, administrative hurdles, higher transport costs and loss of time.”
France will see hits mainly to exports of “transport equipment, chemicals, machinery and electrical equipment, food and beverages, and pearls, precious stones and metals”.
Germany’s main blows come in “transport equipment, machinery and electrical equipment, chemicals, plastics and rubber, and base metals”.
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If President Macron and Chancellor Merkel agree to compromise in the Brexit talks the loss of trade with the UK could be almost halved immediately while both sides settle into their new trading relationship.
Allianz called on the EU and UK to conclude their negotiations in three weeks to ensure businesses on both sides have enough time to adapt to the changes.
They claimed a “technical extension” to the post-Brexit transition period could be used to ensure any agreement is fully operational.
Their report says: “It’s worth mentioning that if an agreement between the UK and the EU is not finalised by the end of October/mid-November, there won’t be enough time for a full ratification of the FTA before the end of the year.
“Hence, we don’t exclude the possibility of a technical extension of the transition period despite the commitment of both sides not to do so.”
The insurance firm also noted Britain would see a “five percent contraction in GDP and a 15 percent drop in exports” if it walked away from the EU without an agreement.
Mr Barnier, the EU’s chief Brexit negotiator, has agreed to remain in London until Wednesday to continue trade talks with UK counterpart Lord Frost.
The pair are then expected to resume their wrangling over a free-trade agreement later this week in Brussels.
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According to the Prime Minister’s spokesman, the UK and EU have finally begun work on a joint legal text.
Mr Barnier had previously refused to put pen to paper on the Brexit deal until Mr Johnson made significant concessions on fisheries and the so-called level-playing field.
The spokesman said: “We are in now what is an intensive phase of negotiations.
“I wouldn’t wish to pre-empt what’s being discussed.
“It’s the first time that we have been negotiating on legal texts and across all areas at the same time and we have welcomed that fact.
“But there is also much work to be done if we are going to bridge what are the significant gaps that remain between our positions in the most difficult areas and time is very short.”
Earlier Mr Johnson said: “On EU negotiations … they’ve come back, I’m very glad to say, to discuss the way forward, we’ll see where we go.”
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